If you’re getting ready to send junior back for his spring semester of college (or preparing to start your own), you may want to avoid the latest edition of the New York Fed’s Issues in Economics and Finance. In it, three Fed economists ask “Are Recent College Graduates Finding Good Jobs,” and the news is sure to fuel talk of a “higher education bubble.” In just seven short pages, the paper lands a series of body blows on the college value proposition.
The study examines the employment outcomes of recent college graduates (bachelor’s degree recipients between the ages of 22 and 27) over the past 22 years, paying particular attention to the impact of the last three recessions (1990, 2000, and 2009-2011) on labor market success. But unlike most analyses, which tend to look only at unemployment and wages, the brief drills down to look at underemployment (whether employed grads are working in jobs that require a college degree) and the quality of those jobs (whether underemployed grads are slinging drinks at TGI Friday’s or working in a skilled occupation). Because the data cover a broad period of time, the researchers pick up on some longer-term trends that are downright worrisome.
The topline: you’re still better off with a college degree than a high school diploma, but that doesn’t mean a college degree is a golden ticket to a good job. Far from it.
Among the findings:
1. Underemployment for recent college graduates is high and has steadily increased since 2001.
According to the authors:
By 2001, the [underemployment] rate had dropped to 34 percent. During the first decade of the 2000s, the underemployment rate rose somewhat sharply after both the 2001 and 2007-09 recessions, and in each case, only partially retreated, resulting in an increase to roughly 44 percent by 2012. Thus, it appears that the underemployment rate has, in fact, been rising for recent college graduates since 2001.
“Only partially retreated” sounds like it could mean “the way things are now.”
2. Underemployed college graduates are increasingly working lower quality jobs.
The proportion of recent graduates holding “good non-college jobs” (those earning $45,000 or more per year in 2012) has plummeted since 2001, while the percentage holding “low-wage jobs” (those with average salaries below $25,000) jumped during that period. The authors find that among underemployed college graduates, “more are working part-time or in low-wage jobs since 2000, while fewer are working in good non-college jobs. This downward trend in the quality of jobs for underemployed recent college graduates compounds the increase in the level of the group’s underemployment over the past decade.”
3. Not all college majors are created equal.
Among recent grads who majored in business, 50% were underemployed and 6% were unemployed; in communications, 54%, 6 %; in liberal arts, 52% and 8%; and in leisure and hospitality, 63% and 7%. At the other end of the spectrum, engineering majors fared particularly well (20% underemployed, 5% unemployed), as did those who studied health (22%, 3%). Education majors also did well (22%, 4%), an indication of how the public schools fared when compared to the rest of the economy.
Higher education advocates will likely say there’s nothing to see here, that the average graduate earns $1 million over their lifetime, and that college is still the best investment you can make.
But those conclusions are based on lagging, aggregate indicators. These latest data sure sound bubble-like. Nearly 90% of college freshmen say they enroll in order to improve their job prospects, and nearly all of them pay dearly for that opportunity in dollars, time, and opportunity costs. Sure, most of them are finding jobs. But far too many graduates are finding ones for which their investment may not have been necessary and was almost certainly too large when compared to the return.
When measured in comparison to “no college at all,” the value proposition still looks robust. But the data also suggest how vulnerable traditional colleges are to alternative providers of skills and knowledge that are tailored to employers’ needs and can produce comparable employment outcomes at a much lower cost. Who’s to say that learners can’t combine low-cost online coursework in core academic subjects with targeted occupational training and meet or surpass these same labor market outcomes? What happens to the thousands of overpriced colleges and universities then?
Colleges are still clinging to their traditional credentialing monopoly, but numbers like these make you wonder how much longer it can last.
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